As we mentioned previously, petty cash is similar to bank and credit card accounts you track in QuickBooks. You need to ensure these accounts remain in balance. To do that, you must reconcile them. In Chapter 10, Reconciling Downloaded Bank and Credit Card Transactions, we showed you how to reconcile these accounts in QuickBooks. Refer to this chapter for step-by-step instructions on how to reconcile your petty cash account. I recommend that you reconcile your petty cash account before you replenish it. This will ensure that you have accounted for all the expenses that have been paid for using petty cash and that you have all the receipts to support these purchases.
While you will hope to avoid such a situation, there may come a time when a customer cannot afford to pay their outstanding balance. If this happens, you will need to write off the receivable as bad debt. We will discuss how to record bad debt expense next.
